Sebi disposes of case against Mavi in GDR issue manipulation

Market watchdog Sebi has disposed of the case against Mavi Investment Fund in which the FII was accused of market manipulation using GDR issues by Cat Technologies and Maars Software International.

The order has been passed after taking into account information provided by Mauritius regulator, Financial Services Commission (FSC).

Mavi has undergone restraint from securities market imposed by Sebi for two years because of the charges levelled against it, the order noted.

Initial probe by Securities and Exchange Board of India had found that Mavi had converted global depository receipts (GDRs) -- a financial instrument used to raise capital overseas -- held by it in the firms into equity shares to sell in the Indian stock markets.

Based on its interim findings, Sebi in 2011 had barred Mavi from dealing the capital markets till the further orders.

In its final order issued on Wednesday, Sebi said that "the charges levelled against Mavi have not been decisively established by the material available on record.

"Having arrived at the aforesaid finding, the show cause Notice needs to be disposed of and the restraint imposed on Mavi...Needs to be vacated."

As part of it investigation, Sebi had sought information from regulators in Mauritius, UK and Switzerland.

After examining the documents provided by Mauritius regulator as well as by Mavi, Sebi said that none of the information established any connection between Mavi, CAT and other entities involved in the manipulation.

Sebi had also asked for certain information regarding the transactions executed by Mavi from UK's Financial Conduct Authority.

However, the UK regulator had informed Sebi that as concerned deals in GDRs was dealt in Switzerland, the desired information should be sought from Swiss Financial Market Supervisory Authority (FINMA).

In its final order in the matter, Sebi has observed that it was still awaiting information from the Swiss regulator.

"If any of the information is received from FINMA which is contrary to the submissions made or information submitted by Mavi, then the same shall not prejudice the right of Sebi to take any further action in accordance with law, as it deems fit," Sebi said.

In 2009, Sebi had received alerts regarding large scale off-market transactions in shares of various companies.

It was observed that one Arun Panchariya had used certain FIIs/Sub-Accounts along with a few other entities to defraud investors by facilitating issuance of GDRs by certain six Indian companies including CAT and Maars.

Later, the GDRs were converted into equity shares and sold in the Indian securities market.